CONCENTRICINTERIM REPORT JANUARY – JUNE 2018

SECOND QUARTER 

  •  Net sales: MSEK 603 (540) – up 11% y-o-y, after adjusting for currency (+1%)..
  •  Operating income: MSEK 126 (100), generating an operating margin of 20.9% (18.5).
  •  Earnings after tax: MSEK 94 (75); basic EPS of SEK 2.36 (1.86). 
  •  Strong cash flow generated from operating activities: MSEK 175 (77) driven by management of working capital.
  •  Group’s net debt: MSEK 132 (335); gearing ratio of 14% (42).

FIRST SIX MONTHS 

  • Net sales: MSEK 1,206 (1,086) – up 13% y-o-y, after adjusting for currency (–2%).
  • Operating income: MSEK 246 (200), generating an operating margin of 20.4% (18.4).
  • Earnings after tax: MSEK 183 (149); basic EPS of SEK 4.62 (3.69).
  • Strong cash flow generated from operating activities: MSEK 286 (155) driven by management of working capital.

President and CEO, David Woolley, comments on Q2 2018 interim report.
Sales development Group sales for the second quarter were up year-on-year by 11% in constant currency and 13% for the first six months, ahead of the published market indices. The increased activity levels in the first six months reflects strong demand across our core regions of North America and Europe. With regard to the emerging markets where Concentric is present, India and South America also experienced strong year-on-year growth whilst China continues with strong growth in construction equipment and negative growth in the agricultural machinery

and truck markets. The largest year-on-year improvements for the second quarter were achieved in the medium and heavy-duty truck market, but we also saw steady growth in the construction equipment and agricultural machinery sectors.

Concentric Business Excellence in conjunction with increased demand

The culture within Concentric to achieve continuous improvement is firmly embedded. The key drivers are to achieve absolute satisfaction of our customers and employees. The Concentric Business Excellence programme (“CBE”) has enabled the teams to efficiently increase our capacity and output across the globe to meet growing demand.

The CBE-programme has continued to improve the group’s profitability and the reported operating margin for the second quarter and first six months increased to 20.9% (18.5) and 20.4% (18.4) respectively. The year-on-year operating income drop through was a healthy 38% for the first six months.

Acquisition Opportunities

We continue to explore acquisition opportunities that will offer either geographical expansion, product expansion into the growing electrification market or enabling technologies that will enhance our current engine and hydraulic product lines to provide us with an even greater presence alongside our global customers.

Global Customer Dual Sourcing

A global customer has publicly stated their strategic ambition to have dual and parallel sourcing for the majority of their total direct material spend and are currently in the process of implementing this sourcing strategy. Historically, Concentric has been the sole supplier of pumps to this global customer and at this moment, negotiations are ongoing. As such, we are unable to determine the impact of these negotiations and while I am confident Concentric will remain an important partner, the outcome may affect the group’s future revenue generation.

Outlook

The overall market has grown y-o-y in the first six months by 9% and current published market indices blended to Concentric’s mix of end market applications and locations suggest the full year growth rate will weaken slightly during the second half of 2018. The seasonal effect of the summer months make it difficult to assess whether the market has reached a sustained high growth rate, particularly the truck market in North America and Europe.

However, the sales order bank remains strong and the level of orders received in the second quarter indicate that sales in the third quarter will be broadly in line with sales in the second quarter, after a seasonal adjustment for fewer working days. Our expectation remains that demand for our products in our North American and European end markets will remain robust for the remainder of 2018 but the business is vigilant and ready to adapt to any market changes. 

Concentric remains well positioned both financially and operationally, to fully leverage our market opportunities.

The information in this report is of the type that Concentric AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out above, at 08.00 CET on 24 July, 2018. 

For further information, please contact:
David Woolley (President and CEO) or Marcus Whitehouse (CFO) at

Tel: +44 121 445 6545 or E-mail: info@concentricab.com

About Us

Concentric AB is the former Hydraulics Division of Haldex AB and from June 16 2011 a separate listed company.Concentric is one of the world’s leading pump manufacturers. Our flow dynamics gives customers advanced technology oil pumps, water pumps, fuel pumps and hydraulic systems. We aim to increase fuel economy, reduce emissions and improve engine control through our technical solutions and precision engineering. Concentric’s global manufacturing presence includes factories in Sweden, Germany, the UK, the USA, Argentina, India and China, backed by central support and development functions. This means we sell locally to our global customers. The business fuses Concentric’s strengths as a pumps maker with longstanding expertise in hydraulic products. Our customers make trucks, construction equipment, agricultural machinery and general industrial applications.

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